Dem
47
GOP
53
Donald Trump issued his tariffs based on his idea of what trade is. He thinks of solid manufactured objects that come from China by ship or possibly by airplane. The U.S. runs a massive trade deficit in this space. What he forgets (or never knew) is that the U.S. runs a massive surplus on services, which don't show up on customs declarations. When a Hollywood movie studio licenses a foreign movie theater to show its films, that is a service export. When a foreign company buys an HP notebook that comes with Microsoft Office preinstalled, they are implicitly buying a software license from Microsoft that is included in the price. When a foreign company hires JPMorgan Chase to manage its IPO, they are buying a service from a U.S. bank. None of these show up when you add up all the customs forms, but they are definitely part of the balance of trade—which Trump simply does not understand.
One item that flies completely under the radar is sales of education. When a Chinese student enrolls at Stanford, he or she has to pay Stanford $62,484 for tuition, and likely another $19,922 for room and board. This amounts to a Chinese person buying $82,406 in educational services from a U.S. organization. From a trade perspective, this is no different from a Chinese person buying a Cadillac Escalade that goes for about that price. In both cases, a foreign person or company has purchased something of value from a U.S. organization and paid $82,406 for it.
The total amount that the U.S. earned from the sale of educational services is greater than the amount it received on the sale of natural gas and coal combined. In other words, from a trade perspective, education is a huge moneymaker for the U.S.
Now Trump and, especially, J.D. Vance are trying to force universities to limit the number of foreign students they admit. This is like telling Exxon it shouldn't sell so much Texas oil to other countries or telling Boeing it should sell fewer 787s to foreign airlines. Education is a popular "export" that brings in a lot of money.
Cutting down on foreign students has a couple of other side effects. First, from the universities' point of view, foreign students almost always pay full freight. They rarely get scholarships from the endowment or other discounts. They also don't get Pell grants from the U.S. government. Some foreign students may have grants from their own government, but Stanford doesn't care who is footing the bill as long as the student pays the $82,406 on time. And the marginal cost to Stanford of one more Chinese student isn't anywhere near $82,406. In fact, it uses the excess payment to allow it to offer scholarships and loans to poor students. Without the foreign students, fewer poor students could attend many colleges in the U.S.
A second benefit of foreign students is they get to live in America for 1-4 years, depending on the degree program. They see how things work here. They see that a vast amount of information is available, some of it very critical of the government. They see that students can say whatever they want and not get arrested. (Oops, that used to be the case. Scratch that one.) They used to see how democracy worked. Many of the students who come to the U.S. will later go back home and become leaders in many fields, often thinking kindly about their time in the States. Trying to ban foreign students is throwing away not only money, but soft power. But Trump doesn't understand or care. (V)